The Australian Taxation Office (ATO) has confirmed they will now issue the new PAYG withholding tax schedules next week, reflecting the lower personal tax rate in the Treasury Laws Amendment (Income Tax Relief) Bill 2016 introduced into the Parliament yesterday.
Employers will be required to lower the amount of tax withheld for affected taxpayers to factor in the new lower tax rate effective from 1 October. Any tax overpaid beforehand will be refunded by the ATO on assessment after the end of the 2016-17 financial year.
This means that contrary to suggestions in media reports today, all affected taxpayers will be able to obtain the benefit of the cut – not at the end of the year but within one month of new PAYG withholding tax schedules being published next week.
In addition all affected taxpayers will receive the full benefit of the income tax cuts from day one of the 2016-17 year as set out in the Budget.
The Government’s changes will increase the middle income tax bracket from $80,000 to $87,000, in line with the Turnbull Government’s 2016-17 Budget commitment.
This will prevent around 500,000 taxpayers going onto the higher 37 per cent marginal tax rate.